Intel's Data Center Demise Is Overstated
We think customers will look past the nanometer headlines.
Intel’s (INTC) stock has taken a bit of a beating in recent months, while Advanced Micro Devices’ (AMD) share price has skyrocketed. We think this stems from concerns about Intel’s manufacturing road map relative to AMD’s. We’re not shaken by such news and think the sell-off has led to a buying opportunity for wide-moat Intel. Conversely, AMD’s shares appear significantly overvalued to us.
The primary issue is that Intel’s first 10-nanometer server products, code-named Ice Lake, won’t hit the market until early 2020. Consequently, the market has assumed that AMD’s 7-nanometer Epyc server central processing unit, code-named Rome and set for a 2019 launch, will be immediately superior to Intel’s offerings at the time of launch. However, we don’t necessarily think this is the case, as we equate Taiwan Semiconductor Manufacturing Co.’s (TSM) 7-nm process to Intel’s 10-nm process, rather than a sign that AMD and TSMC have leapt past the semiconductor titan. Historically, the marketing and engineering definitions for the number used in process nodes were in agreement. More recently, the two have diverged to the point of no return. We consider TSMC’s 10-nm process to be more comparable to Intel’s 14-nm, as TSMC’s 16-nm was just a repurposing of its 20-nm process with FinFET (3D transistors) while Intel pioneered FinFET with its 22-nm process.
Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.